Amazon poised to enter tablet market

Amazon is looking to take a bite out of Apple’s iPad sales with a tablet computer of its own. The world’s largest online retailer, which just reported second quarter sales up 51% (read here), has enjoyed great success with its Kindle e-reader. So why not try and extend that success to the tablet world and allow customers to download movies, music, and books all on one device?

Industry watchers, encouraged by hints from Jeff Bezos, have anticipated Amazon’s entry into the tablet market for awhile. Earlier this month The Wall Street Journal, citing people familiar with the matter, reported that Amazon plans to release a tablet by October. The initial device, whose design and production are reportedly being outsourced, will feature about a nine-inch screen and run on Google’s Android platform. The Journal also reported that Amazon is working on a tablet of its own design that could be released next year.

The obvious problem facing Amazon is how to keep its tablet from cannibalizing Kindle sales. While the company doesn’t disclose sales of its dedicated e-reader, it has said the Kindle is its best-selling device and that it now sells more e-books than print ones (read here). With more people shifting to digital books (and other digital downloads) the demand for Kindle, its main rival Nook, and other e-readers is likely to increase. That trend and Amazon’s investment in online entertainment services, such as Amazon Instant Video, may have convinced the company that there’s room for both devices. Amazon’s deep pockets could allow it to undercut the iPad on price — even to the point of losing money on tablet sales — to support sales of its digital content.

Taking on Apple, which as of June had sold an impressive 25 million iPads, won’t be easy. But if there’s any company with the resources and marketing savvy to challenge Apple’s dominance in tablets, it’s Amazon.

If Amazon does indeed release a tablet in the fall, what will it be called? Any suggestions Bizmology readers?

Alexandra Biesada shops everyday, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.

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